CFIUS Announces Changes to Penalties and Subpoena Authority

On Thursday, April 11th, the Treasury Department, as Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a Notice of Proposed Rulemaking (NPRM), bolstering CFIUS’s authority and increasing its penalty and enforcement abilities. In issuing this newly proposed rule, CFIUS noted that the changes would be the largest since the Foreign Investment Risk Review Modernization Act of 2018.

CFIUS reviews ​“certain transactions involving foreign investment into businesses in the United States and certain transactions by foreign persons involving real estate in the United States” to understand the effect of such transactions on the United States’ national security. CFIUS enforces compliance with statutes, regulations, and negotiated agreements, using its ability to impose civil monetary penalties and other remedies.

The proposed rule has three key components. First it expands the subpoena authority to acquire information from ​“third persons not party to a transaction notified to CFIUS and in connection with assessing national security risk associated with non-notified transactions.” This will allow CFIUS to obtain more information for non-notified transactions, which CFIUS indicated would help it better assess which non-notified transactions require further review. Second, CFIUS would have increased authority to impose harsher penalties on those that provide incomplete or misleading information or otherwise violation CFIUS rules and regulations. The base maximum would be raised from $250,000 to $5,000,000. Lastly, the rule would institute an extendable timeline for parties to respond to risk mitigation proposals to allow CFIUS to conclude reviews or investigations within ​“the statutory time frame.” Importantly, parties will only have three business days to respond to risk mitigation proposals, which could create time crunches for negotiating with CFIUS.

Other items in the proposed rule include:

• Expanding the scope of information CFIUS can require of transaction parties and other persons on transactions not filed with CFIUS.
• Extending the deadline for submissions for reconsiderations of penalties.

Parties affected by the rule have until May 11th to submit comments to Treasury. Those who frequently engage in the CFIUS review process may wish to submit comments during this time.

Please contact our CFIUS, export controls, and sanctions team if you need assistance navigating these latest developments.